Last updated on November 28th, 2023.
You have a neat little pile of cash sitting in your savings account. However, that same pile of cash has been sitting in your savings account for the last five years, during which time it has accrued a whopping $.05 in interest. You know you need to get your cash to work for you–the problem is, you have no experience in the realm of investing.
If you’ve moved into the space of creating a wealth mindset then you know there are plenty of options out there in the world of abundance. Other people are making it happen for themselves. They’re tapping in. There is plenty of potential and in this article we highlight a way of linking into those specialist in the field of equities trading who are creating their own success.
What are the five best social trading platforms to help make money work for you? While the Internet and smartphones have proliferated social trading apps, the five best social trading platforms to help make your money work for you are as follows:
Any of these options offer effective means of putting your money to work, allowing you to get investing feedback from people in your network and/or mirror the investment strategies of successful individuals or entities. This gives you the chance to keep your money ahead of the cost of inflation.
The 5 Best Social Trading (Copy Trading) Platforms
Why struggle through the mess of analysis and timing when you can follow the pros that hav proven their aptitude in trades.
While making money with each of your trades is never a sure thing and past performance does’t guarantee future returns, seeking the wisdom and guidance of experts is always recommend.
The following platforms have those experts!
eToro is a social trading and multi-asset brokerage company that focuses on providing financial and copy trading services. The eToro trading platform allows investors to view, follow, and copy the network’s top traders or robot advisors automatically.
eToro gives investors the ability to track the investment history of other traders and put their money to work in a variety of appreciating assets, including stocks, CFDs, and cryptocurrencies.
The following is a list of some of the advantages of trading with eToro:
- Good fit for beginners – if you are new to investing and do not have much time to commit to performing market research, eToro is a great option for those just getting started in the investment game, as the ease of following other investors is very straightforward
- Large client base – with more than 10,000,000 users worldwide, eToro is trusted by a significant pool of investors, leaving the door open to a plethora of diverse follows for the inexperienced investor
- Cryptocurrency trading capacity – as cryptos are traded on special exchanges, not all platforms support crypto transactions. In this regard, eToro is ahead of the curb in the world of social and copy trading
- Ease of copy trading – one of the key distinguishing features of eToro is the ease with which copy trading is implemented. Investors who want to be followed and have their investment strategies copied can easily mark themselves as available, allowing newer investors to take advantage of the plan they have in place
- Stringent risk control rules – such rules are designed to protect inexperienced investors from following the advice of someone who has money to burn and wants to toss all of his or her money at extremely speculative, high-risk equities
- Automatic trades made in real-time – when you follow the investment strategy of the platform’s most successful users, you have the option of having an equivalent transaction take place in your account at the same time the person you follow makes his or her transaction. This ensures that the follower is getting the same deal as the expert
- Facilitates social interaction – while other social trading platforms offer some or all of the features listed for eToro, few offer the ease of social interaction that eToro provides. This allows users on the platform to react and comment on trades in much the same way that people communicate on traditional social media platforms
Does eToro Copy Trader Work?
eToro copy trader can absolutely be an effective means of putting your money to work.
In fact, it allows you to copy the trading patterns of investors of your choice, taking a proportional share from your investment account, at no charge to users.
However, as with all forms of social trading, eToro copy trader comes with risks. While leveraging can allow investors to get very handsome returns in a short amount of time, it is these same handsome returns that should raise a red flag for followers.
Followers may be tempted to copy the portfolio of someone who has posted 400% returns. After all, who wouldn’t want to get that kind of juice on their money? However, such high returns are completely unsustainable over the long haul and point to an investor who has momentarily captured an inefficiency in the market that is sure to correct in a matter of days, if not minutes.
In general, there are some best practices for eToro copy trader working best for you:
- Copy those traders who have a history of smaller, more consistent returns over a long period as opposed to those who have “gotten rich quick.”
- Don’t look to get enormous returns–have realistic expectations
- Actively manage your profile. Most traditional financial advisors preach “invest and forget” so that you don’t get caught up in market fluctuations. However, copy trading needs to be more actively managed, as you are copying the whims of another person in your network
- Have patience. Even with copy trading, it is best not to make emotional decisions. Stick with your plan
- Know your risk tolerance. Understand that if you want to copy those investors with a flair for risky assets that your gains can be extraordinary but that major losses are just a slip away
Is eToro Safe?
eToro is a safe platform in that it is regulated by the FCA and CySEC and is compliant with the MiFID. This means that users can feel safe that their money is protected from fraud and will have recourse in the event that the platform itself becomes insolvent.
However, once your money is invested on eToro, it is not safe from normal market losses. As with all things related to investing, in order to reap the fruits of market gains, you have to bear the risk of losing your money.
What is the Minimum Investment with eToro?
eToro’s minimum investment for online banking transfer is $50. This is the same for funding an initial account or adding funds to an already active account.
Once you have money in your eToro account, you can choose to purchase instruments at varying prices, depending on the cost of the instrument and the amount you currently have available in your account.
For copy trading, a proportional balance will be withdrawn from the remaining funds in your account, based on the transaction of the signal-caller.
ZuluTrade is a social and copy trading platform that allows users to mimic the investment strategies of experts in forex (foreign exchange) markets.
The user base within ZuluTrade is split into two different categories:
- Signal providers – these are traders that have developed a strategy for investing and are willing to be followed or copied by other users
- Followers – these are traders with a lower level of investing experience who typical mimic the portfolios of signal providers and/or other followers
ZuluTrade has a number of enticing advantages for users of its platform:
- Signal provider compensation fees – when signal providers demonstrate an ability to get positive returns and maintain a wide pool of followers, they can be awarded a compensation fee from the platform
- ZuluGuard – this is a type of investment safeguard that automatically unfollows a signal provider if his or her investment strategy changes. This allows the follower to assess the signal caller’s new strategy and/or portfolio to determine if he or she wants to continue investing in a similar manner to the signal-caller
- Investor rankings – this allows followers to get a real-time look at which investors are performing the best. As rankings are provided on a number of metrics, such as overall profit, number of followers, and return on investment, followers can then decide which features they value and make quick decisions on which signal provider to follow
- Free demo accounts – this is a great perk for those who are completely unfamiliar with financial markets and how asset trading works. As these demo accounts are fully functional, prospective users can become fully adept with the platform interface and features prior to signing up for a real account
- Access to all traders – some platforms will only allow users to see the last 50 to 100 traders in the network. ZuluTrade gives users complete access to all trader records that have taken place on its platform, ensuring full transparency so that users know who has left the platform and what their returns looked like
- Leader in forex – while ZuluTrade does offer assets such as stocks and cryptocurrencies on its platform, it is a true leader in allowing users to invest in foreign exchanges, quickly and efficiently converting currencies to buy shares of diverse markets
- Low fee and balance structure – while most social and online trading apps have lowered or eliminated the fees traditionally associated with stock brokerages, ZuluTrade is comparatively cheap, with as little as $1 required to open some accounts and minimal transaction fees for mature accounts
Darwinex is an electronic trading platform that breaks down a trader’s strategy and rates it according to its risk, scalability, performance, and history. It then allows other investors and users of the platform to view the analysis of each trading strategy and compare it with his or her own unique investment goals.
Darwinex is not a true copy trading platform in that it does not have its followers mirror the trades of a leader in a near one-to-one manner. Instead, it serves as an asset management platform by protecting the risk of its users as they choose to follow the investment strategies of users in a particular risk category.
There are a number of advantages to using Darwinex if you are new to the social trading world:
- Profitability of investment strategy – if you are an experienced investor, you can profit off of your strategy by investing in the company’s DARWIN, which is a standardized risk version of that investment strategy. The more users who successfully adopt your strategy, the more you stand to profit, as you receive a 20% success fee on the profit of other investors
- Extremely low fees – as transaction fees on this platform are next to zero; users can make frequent trades and adjust their investment strategies on the go without the fear of hemorrhaging their account balances on transaction fees
- Wide array of instruments – through buying and selling DARWINs, Darwinex exposes users to a wide array of instruments, including forex, commodities, cryptocurrencies, stocks, indices, metals, and CFDs
- Strict regulation – Darwinex holds a Markets in Financial Instruments Directive (MiFID) passport to deliver its service in all E.U. countries. This helps ensure the company is as transparent as possible in regard to clients, employees, and the law
- Financial Services Compensation Scheme (FSCS) Insurance – clients benefit from this free supplementary insurance that protects eligible parties for up to £500,000. They also hold client funds in segregated accounts in Barclays (U.K.), giving users additional peace of mind in the hypothetical event of insolvency
Ayondo is a FinTech (financial technology) company that aims to democratize the trading of assets and put the power in the hands of investors. It markets its service of social and copy trading as the new way to trade equities.
The Ayondo user base is divided into two categories:
- Top traders – this allows those with clear investment strategies to market their strategies to followers and earn additional income and “career rank” within the company’s platform by attracting users to follow and copy their strategies
- Followers – these are users with limited investment experience who can select specific top traders to follow, based on investment strategies that seem most palatable to them
There are a number of advantages to investing your money with Ayondo:
- Incentives for performance – Ayondo markets its service as a career path for top traders, which incentivizes them to find the best strategies possible to attract the most followers. Top traders can move through street trader, advanced, professional, risk-adjusted, and institutional-based on performance, with increased perks at each level
- Remuneration options – top traders have the option of being rewarded for their performance based on performance or volume, which can be helpful as they try to narrow down their investment strategy and attract more followers
- Extensive track record – Ayondo has been in the financial services game since 2008, continually evolving and growing its offerings to get where it is today. To date, there have been in excess of 128,000,000 real money transactions take place on the platform
- Low start-up costs – you can open an Ayondo account and become a follower for as little as $1 in your initial brokerage account
- Insurance and security – Ayondo has supplemental insurance of £1,000,000 and is regulated by the Financial Conduct Authority, giving investors peace of mind that their money is protected against fraud and loss
- Smartphone friendly – the platform is among the easiest to use when making transactions on your mobile device
Tradency is a software and solutions provider that connects users to brokers in specific markets. Tradency is a pioneer in the realm of auto trading, mirror trading, and robo advisors.
Developed in 2005, Tradency allows retail customers to automatically mirror the investment strategy of trusted professionals or robo advisors. It is important to note that Tradency itself is not a mirror trading platform; rather, a technological innovation that connects retail investors to brokers whom they want to mirror.
Some distinguishing characteristics of Tradency include:
- Easy comparison of strategies – the screen of the live signal on the Tradency website allows users to easily compare the investment strategies of trusted advisors and decide which portfolios they want to mirror
- Automatic mirroring – when a Tradency user is connected with a broker they like; the retail customer will automatically make transactions scalable to those made by the broker
- Semi mirroring – this gives the customer more control over the trades being made as they are allowed to look in on the live trades of strategy providers. They can then decide which trades to mirror instantly and which to ignore
- Filters – this allows retail customers to quickly and efficiently sort through the pool of available brokers and strategy providers, allowing them to pair with those who meet their needs for risk, return, and volume
- High transparency – all historical trade information, as well as all open trades, are available for users to view, giving them the ability to assess how their account is likely to perform given a particular risk strategy
- Free demo accounts – all demo accounts are fully functional, allowing potential customers to master the platform and understand what they are getting into prior to making transactions with real money
How Does Social Trading Work?
Social trading works on the tenets of social networking. Just like Facebook, Twitter, or Instagram connect you with people in whose lives and opinions you are interested in following, social trading platforms connect novice and experienced asset traders in a manner that allows them to exchange methods, ideas, strategies, and data.
Social trading platforms offer a variety of benefits to their user bases, some of which are included in the following list:
- You can gain information and opinions on markets from people who have similar investing interests as you
- You can make collaborative trades with other people in your network, sometimes referred to as copy trades, or just use the information gathered from your network to make trades of your own
- You have a high degree of choice in the networks you join, and the asset classes in which you to choose to invest, as the list of traders you follow and collaborate with is completely willful and discretionary
- The flow of information on a social trading site is free, with users in the network being able to cross-reference each other’s profiles to see how they have performed and what kind of investment strategy they utilize
- Private messaging features and group discussions are great ways to pick the brains of those in your network and find out if certain users are trustworthy and reliable
While the similarities between traditional social networking platforms and social trading platforms are many, they do not operate in exactly the same manner, and there are a couple of key differences you should note before signing up for a social trading account:
- The profile designed on a social trading site will be highly specific, with personal information relegated to such items as risk tolerance, trading goals, and asset classes of interest
- There will be little information on a social trader’s profile about hobbies, relationship status, or pictures of life events
In short, social trading works in a manner very similar to traditional social networking sites. However, it is more closely related to LinkedIn than Facebook in that social trading sites are specific. They connect those people who are looking for information about investing and allow them to share and mimic each other’s trading patterns.
What is the Difference Between Social Trading and Copy Trading?
Social trading and copy trading are very similar, but they have some key differences. Some may argue that social trading is a broader and more wide-reaching concept, while copy trading is a specific niche of social trading.
Both social trading and copy trading are enticing to new investors, as they allow novices to lean on other investors to make their own trades.
However, social trading and copy trading differ in the following ways:
- Social trading allows users to gain information from a social network of traders and make their own trading decisions, while copy trading automatically mirrors the trades of a selected account. In fact, copy trading is sometimes referred to as “mirror trading.”
- Social trading can be a much more active and work-intensive process, as social traders must process information and make their own decisions, while copy traders can simply find the profile of a trader they like, click “copy trade,” and let the chosen trader run with their account
- Social trading gives you a higher degree of control over your finances. Although you are gaining information from others in your network, you are ultimately the one making the decision on transactions; copy trading is passive once a signal provider has been chosen, as you experience the scalable gains and losses of the person you are following
In short, the main difference between social trading and copy trading is that while social trading is an active trading process, copy trading is a passive trading process that automatically mirrors the strategy or portfolio of someone else.
Is Social or Copy Trading Illegal?
Yes, both social and copy trading are legal.
However, it is not just as simple as saying that your brokerage is going to offer these services. Brokerages that offer social or copy trading services must be licensed and regulated by the appropriate regulatory entities.
Some of the main entities that regulate social and copy trading brokerages include:
- United Kingdom’s Financial Conduct Authority (FCA)
- Cyprus Securities and Exchange Commission (CySEC)
- The United States Securities and Exchange Commission (SEC)
- U.S. Commodity Futures Trading Commission (CFTC)
Any social or copy trading platform that is not regulated by one of these entities should not be trusted, as users may be at risk of losing their money to fraudulent activity.
Can You Make Money Social Trading?
Yes, you can make money with social trading.
In fact, you can make a lot of money with social trading, as they employ a concept known as leveraging, which allows you to earn an even greater amount on profitable investments.
Leveraging is a temporary loan given to the investor by the broker. In a simple example, if you make a $100 investment and leverage it x10, you are now making a $1,000 investment. For profitable investments, this leverage means that your return on investment is ten times greater, as well.
However, most people (about 67 percent) lose money through social trading because they fail to realize that while leveraged gains are wonderful, leveraged losses are painful. As such, to make money in social trading requires a much more active approach than the simple buy stock, sit back, and watch-it-grow approach of traditional trading.
How Do I Set up Social Trading?
There are several steps required to set up a social trading account that are fairly consistent across platforms. The process is very similar to setting up a regular social media account, with a few notable exceptions.
- You will need to go to the social trading site of your choice and select “create profile.” In this step, you will need to formulate a username and password
- You will need to read and agree to the risk disclaimer. This lets you know that there are no guarantees when investing your money and makes sure you are 100% clear on the service being provided
- You will choose a trader or follower role. The steps for set-up will be slightly different if you are choosing to share your investment strategy or find other people to follow
- You will then add your personal information, such as name and date of birth. You may also be required to complete some form of verification to ensure that you are a real person and not a bot
- The last step is usually to connect your bank account or PayPal credentials to your profile. This will allow you to deposit funds for trading or withdraw when you think the time is right
The order of these steps may vary across platforms, with some requiring the signature of certain waivers or the acknowledgment of disclosures. However, the same general information will be required across all profiles.
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